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Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out today. Mark Najarian, the managing editor of Money and Markets, is filling in …
The oil and gas renaissance has one of its first big winners!
When Money and Markets columnist Mike Larson wrote about master limited partnerships (MLPs) on July 23, it sent many readers scrambling for investor encyclopedias to learn as much as they could about the sector.
Those who did it quickly and took Mike’s advice and bought into the sector could be celebrating a major windfall today, with Kinder Morgan Inc.’s (KMI) move to consolidate its various partnerships into a single company, in a $44 billion cash-and-stock merger. It marks the largest sector deal since Exxon-Mobil in 1999 and reflects the growing excitement in the shale-drilling industry.
“The deal highlights the new attention on MLPs and the growing excitement on the oil and gas sector.”
Shares of Kinder Morgan Inc. (KMI) soared today after the announcement. The shares of the constituent MLPs that were under the Kinder Morgan umbrella recorded even bigger gains. The deal is complicated, but it highlights the new attention on MLPs and the growing excitement on the oil and gas sector. It will make Kinder Morgan the largest pipeline company in North America. As part of the deal, the company will consolidate the MLP entities within the parent company — Kinder Morgan Energy Partners LP (KMP), Kinder Morgan Management LLC (KMR) and El Paso Pipeline Partners LP (EPB).
Houston billionaire Richard Kinder, who has a 24 percent stake in the parent company, told CNBC that the move will help Kinder Morgan lower cost of capital, make more acquisitions and invest in more projects.
Other tax-efficient MLPs mentioned by Mike in his column were JPMorgan Alerian MLP ETN (AMJ), which was up 3.7 percent this morning; and ALPS Alerian MLP ETF (AMLP), which gained 3.6 percent. Other MLPs were picking up similar gains.
|Houston billionaire Richard Kinder says Kinder Morgan will combine the energy MLPs under his firm’s umbrella in a $44 billion deal.|
Here’s what Mike wrote about MLPs: “If you’re looking for income, one of my favorite options is energy master limited partnerships. MLPs are companies that make money from distributing, storing and transporting oil, gas and gas liquids. … Bottom line: If you haven’t done so already, ditch your junk [bonds]! Then go shopping for some MLPs!”
MLPs don’t pay federal income tax and trade in “units” as opposed to shares. Kinder formed his company initially with Enron spinoffs in the 1990s and helped establish the MLP structure. Here’s more on the subject from Bloomberg.
Not every MLP investment will turn out so successful, but whenever excitement hits a specific area of the investment world, it’s good to be ahead of the game.
I’m interested to know if you have already been investing in MLPs. What has been your track record? Are you now looking into this sector given the low level of yields elsewhere? Join the conversation by clicking here.
|OUR READERS SPEAK|
My Money and Markets column Friday centered on two issues — how brick-and-mortar retailers can compete with online sellers, and the increased U.S. military action in Iraq. Both issues brought a lot of response from our readers with a variety of viewpoints.
First, in regard to retailing, many people said customer service was an all-important factor in deciding where and how they shopped.
Reader Jenks pointed out that seeing (and feeling) is believing: “Not being able to see and feel a product I’m buying is a big negative for me. Returning unacceptable merchandise by mail is another.” Reader Arden had similar remarks.
Thanks for your comment. I have to agree — for many products, if I can’t examine it in person, I am reluctant to buy. And, more importantly, it seems easier to go back to a store and return something than to have to repackage it and send it off for a refund. — Mark.
Reader Mary says she shops through different venues depending on the product. “I do shop Amazon, primarily for electronics and Kindle books. I was sorry to see how poorly their profit picture looks. It is hard to even imagine since the web site is huge although many sellers there are probably relatively independent vendors. For clothing and shoes, I will only buy in person after I check how it fits.”
Same with me — I buy books online, but I will only buy clothing or shoes in person. I don’t understand how people can buy clothing or shoes without trying them on. Should I try buying them online? Have you readers had success with that? — Mark
Reader H. Craig points directly at customer service: “Local retailers here in Glendale, CA, that are doing relatively well each offer quality customer service. A willingness to assist, as well as sufficient staffing to permit individual service and attention is how they can compete with online retail giants … Offering limited service and regular (high) prices for walk-in retail customers is how companies lose business. Eventually, they cut staff and hours, then employee pay, and finally, they are down to “lean and mean.”
Meanwhile, the renewed U.S. military action in Iraq brought many emotional and informative responses.
Reader Tom could see it from a personal angle. “If ISIS strikes US interests somewhere in retaliation for our air strikes then we may see boots on the ground. I have a son and son-in-law that served in Iraq and both expected to see the government collapse. … ”
Reader Kay sees it as a U.S. obligation to protect some of the religious minorities, given the recent historic context: “We created the problem there by attacking under false pretenses and destroying the country and its leadership. We must now continue to protect those we left defenseless and vulnerable.”
Thanks. It is a tough question. I wonder how long we should have this obligation and how far should we go. What signs would we need to see before we could finally say we’ve done our duty and we can finally leave it to a local (stable) government?
|OTHER DEVELOPMENTS OF THE DAY|
One dramatic development is on the minds of a lot of people right now, so we’ll stick to that story today.
Good news for drivers: The Lundberg Survey reports that gas prices have fallen by an average of 6 cents a gallon during the past two weeks. The national average is $3.52 for a gallon of regular unleaded.
Other surveys provide even better news for consumers. Gasbuddy.com shows the national average at $3.47 per gallon, while AAA survey pegged the national average at $3.48. According to Reuters, the San Francisco Bay area had the highest price at $3.95 a gallon for regular; the lowest price was in Jackson, Miss., at $3.19 a gallon. …
Does the price of gasoline determine your driving plans for the summer? Add your comments here.
Smokin’ hot: The states of Washington and Colorado are reporting success with (legal) sales of recreational marijuana. The Associated Press reports that sales reached $24.7 million in June, a record high (so to speak) and a 19 percent increase from May. In the first six months of 2014, recreational marijuana sales in Colorado hit $115 million, giving the state about $20 million in tax revenue. Meanwhile, Washington posted sales of $3.8 million in its first month of legality, making the state about $1 million in added tax revenue. …
Are you in Colorado or Washington? Had any experience or seen anything interesting related to the marijuana business? Add your comments here.
A new investment option: Shares of real estate developers rose in India today after regulators approved regulations for real estate investment trusts (REITs). The Economic Times of India reports that final guidelines were issued Sunday. Authorities hope the new rules will help attract more foreign investors to the sector.
Remember, you can comment on these or any other items by clicking here.
P.S. MannKind Corp. (MNKD), one of the holdings in the Top Stocks Under $10 portfolio, jumped today after the biopharmaceuticals company said it signed a licensing agreement worth as much as $925 million for its inhaled insulin with French drug maker Sanofi. To learn how you can receive Mandeep’s next recommendation, click here.
(Mike Larson is on assignment. His regular afternoon column will return Tuesday.)